Connected Cars Drive Value

Autonomous driving and electric cars may dominate headlines about the future of the automobile, but the era of the connected car has already arrived. Fueled by demands from an always-connected mobile society, millions of cars equipped with built-in connectivity are driving off dealership lots every year.

“Connectivity enhances safety features such as parking assistance, adaptive cruise control, blind spot assistance, collision avoidance and improved night vision, to name just a few,” he says. “While those features are important to attract new buyers, the value of connected cars to automotive and other industries, such as insurance, extends much further.”

Let’s stay in touch

Data generated by connected vehicles has inherent value, whether it’s used to study the reliability and service life of a power window relay, analyze and automatically optimize engine performance in a wide range of environments, understand driver habits, communicate with other vehicles, predict failures, report an accident, or track and predict any of a vast range of specific vehicle metrics.

Ford Motor Company will be using the data to customize maintenance and services, improve safety and enhance the driving experience.

“With connected vehicles, we can create a custom maintenance schedule for the customer,” says Roopak Verma, Ford’s CIO for Europe, the Middle East and Africa. “Today, we might tell a customer to change the oil every 10,000 miles, but in reality the schedule should be based on the customer’s driving habits. With connected capabilities, you can know it’s OK to wait until 11,500 miles, and the same applies to every component in the car.”

Connectivity also enables Ford vehicles to automatically reconfigure driving characteristics based on weather and road conditions.

In a pilot project in London, Fords are even tapping into data from parking lots. “You enter an address into the GPS, and you can see in real time where the parking spaces are — and in London, that’s a big deal,” Verma says.

Ford is conducting pilot projects for car sharing, which is made easier with connected cars. Rather than exchanging keys, drivers can simply send a code to unlock the vehicle over a mobile phone. Settings for the seat, radio, rearview mirror and more can be activated with the touch of a button on a smartphone.

“I believe the biggest impact is going to be to the fleet business, because you can really optimize your costs,” Verma says.

Larry Stolle, global automotive marketing director at SAP, says advancements like these are changing the fundamental makeup of cars. “I like the contrast Dr. Lawrence Burns from the University of Michigan makes: When you look at the old DNA of the industry, the automobile was fossil-fuel powered, mechanical, owned and operated by a person, and built to suit many purposes,” Stolle says. “The DNA of the car is changing — self-driving, shareable and more types built for specific uses. That future is here, now.”

The collected data has great potential value beyond manufacturers, for example to third-party service providers such as auto insurance companies. Vehicle information can help insurers adjust rates based on driver performance, leading to more efficient risk-pricing models, lower claims and faster claims processing. Marketers would pay for that data, too, because they would have yet another channel to reach customers. Plus, new services could be offered based on the data — imagine drivers entering a route into their GPS and receiving a proposal for trip-dedicated roadside assistance due to road and weather conditions.

Governments have begun to grasp the significance of connected vehicle data. Proposals by federal regulators in the United States, the European Union and Brazil are targeted at either encouraging or requiring manufacturers to include telematics to improve safety, report crashes and reduce incidents of vehicle theft. The U.S. National Transportation Safety Board is creating standards to promote connected technologies, predicting that crashes may be reduced by more than 75 percent. The European Union in 2013 called for the inclusion of crash alert devices, estimating that this action could save 2,500 lives annually. Governments, as well as private companies, can also use data about road conditions to focus their investments on road repairs or route planning.

Retailers are eager to tap into the personal data collected, including location, but the challenge is finding services that both benefit the customer and address privacy concerns, Ford’s Verma says.

“We have so many legal constraints, data privacy constraints. How do we ensure the user’s ownership of data is taken into account?” Verma says. “That is slowing us down a little because everybody wants to be extremely careful in complying with the law.”

One solution is to give drivers the right incentives, according to Fangmann. “Most people are willing to give up some data privacy for a 5 to 10 percent better deal on services or products,” he says.

“Manufacturers have a reasonable chance of generating revenue from an owner during the duration of a vehicle’s full warranty, a window of about 3 to 5 years. Once that period ends, things change,” Fangmann says. Owners soon begin making greater use of aftermarket service and independent parts providers.

Compounding the problem is the fact that cars are staying on the road longer, with the average age of vehicle registrations creeping up to 11 years. IDC reported in 2014, citing survey data and registration statistics, that 71 percent of the U.S. driving population will likely not upgrade their vehicle for 2 to 7 years — or longer.

Connected cars alter that equation by offering manufacturers an effective way to stay in touch with vehicle owners over a vehicle’s entire life cycle. Manufacturers would have a much greater chance of maintaining service revenue and a stronger brand-building channel to drive repeat sales. And that always-on connectivity can help automakers notify drivers about recalls and address security threats more effectively by issuing over-the-air software updates to critical systems.

Not too late for older models

The number of new vehicles shipping with telematics systems accounts for only a small percentage of vehicles on the road today. For vehicles that predate the connected car revolution, CSC offers hardware, services and an online platform that can collect and report performance data from a car’s controller area network (CAN) bus port, used for diagnostics.

Data is displayed in a dashboard on a variety of mobile devices for the driver, owner or fleet manager, as well as the manufacturer. “Car makers, rental agencies and enterprise fleet managers have the opportunity to bring millions of vehicles online,” Fangmann says.

Despite the challenges in ramping up quickly, automakers need to continue to push ahead with connected capabilities, as competitors who already understand the value of large data pools are nipping at their heels. A few well-known Silicon Valley enterprises with large connected customer bases, such as Google, have been experimenting with their own mobility services and connection technologies.

“These companies are making rapid progress, and they’ve already connected customers,” Fangmann says. “This could allow them to become the owners of the connected car space before manufacturers realize they’ve been overtaken.”